How to Review a Private Placement Memorandum (PPM) for a Delaware Statutory Trust (DST) Offering ~ Part 1

With­in the past six years we have reviewed near­ly 700 Pri­vate Place­ment Mem­o­ran­dums (PPMs) for a vari­ety of Alter­na­tive Invest­ments (ALTS). We main­tain records and sum­maries of all the offer­ings we have reviewed. This is part of full White Paper on PPM Review.

Octo­ber 1, 2025

By Al DiNi­co­la, AIF®
1031 Tax Deferred Exchange Spe­cial­ists & DST Advi­sor
NAMCOA® — Naples Asset Man­age­ment ~Com­pa­ny®, LLC
Secu­ri­ties offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC

For­tu­nate­ly, the for­mat­ting of a PPM fol­lows a pre­dic­tive pat­tern, and infor­ma­tion is laid out in a sim­i­lar sequence in almost all PPMs. That enables us to pro­vide a review of poten­tial alter­na­tives for investors seek­ing ALTS.  Most of the requests are for Delaware Statu­to­ry Trust used in con­junc­tion with a Sec­tion 1031 tax deferred exchange. Oth­er investors will seek REITs, Oil & Gas Pro­grams, IRA to ROTH con­ver­sions and oth­er alter­na­tive invest­ments seek­ing to diver­si­fy their port­fo­lios. This is an overview and sug­ges­tion on how to review a PPM.

Exec­u­tive Sum­ma­ry of the Offer­ing

Delaware Statu­to­ry Trusts (DSTs) are increas­ing­ly pop­u­lar vehi­cles for investors seek­ing expo­sure to insti­tu­tion­al-qual­i­ty real estate while pre­serv­ing tax advan­tages through §1031 exchanges. DSTs are not for every­one since it is required that investors be con­sid­ered an accred­it­ed investor. For many investors, DSTs pro­vide pas­sive own­er­ship, port­fo­lio diver­si­fi­ca­tion, and poten­tial for pre­dictable income streams. How­ev­er, like all pri­vate place­ments, DSTs car­ry risks, includ­ing illiq­uid­i­ty, spon­sor depen­dence, and real estate mar­ket volatil­i­ty.

Most PPMs begin with a sum­ma­ry that high­lights the prop­er­ty, the invest­ment strat­e­gy, and high-lev­el terms. Some PPMs will ease into the text and tech­ni­cal prose with col­or brochure mate­ri­als. Oth­er PPMs will be some­what of a spar­tan or gener­ic flow with all text and no brochures.

Investors may look ini­tial­ly at the Prop­er­ty Snap­shot. This may include typ­i­cal real estate pre­sen­ta­tions such as loca­tion (loca­tion, loca­tion), type of prop­er­ty or asset class, acqui­si­tion cost, and occu­pan­cy lev­els. We will ampli­fy these items in a future sec­tion. The next lay­er may include invest­ment objec­tives. Mean­ing is the offer­ing focused on sta­ble income, cap­i­tal appre­ci­a­tion, or a blend. Some­thing that is typ­i­cal­ly out­side the nor­mal real estate bat­tery of ques­tions would be the Spon­sor overview. This back­ground of the spon­sor and the affil­i­at­ed com­pa­nies is very impor­tant.

A note to the investor would be that the sum­ma­ry often paints an opti­mistic pic­ture. The brochures and illus­tra­tions may be engag­ing but do not stop there. There are many deep­er details con­tained in lat­er sec­tions.

The Pri­vate Place­ment Mem­o­ran­dum (PPM) is the sin­gle most impor­tant doc­u­ment gov­ern­ing a DST invest­ment. While it is still pos­si­ble to request and receive a hard copy of the PPM, most PPMs are deliv­ered elec­tron­i­cal­ly. It pro­vides dis­clo­sures required by law and serves as the investor’s roadmap to under­stand­ing risks, finan­cial pro­jec­tions, spon­sor oblig­a­tions, and struc­tur­al fea­tures. This white paper pro­vides a prac­ti­cal frame­work for review­ing a PPM, help­ing investors iden­ti­fy crit­i­cal details, how to ask the right ques­tions, and make more informed invest­ment deci­sions. Occa­sion­al­ly investors may request to have the short ver­sion (remem­ber the old cliff notes for those who attend­ed col­lege years ago) or a ver­sion that is high­light­ed with all the “impor­tant ele­ments”.  That is not per­mit­ted, and advi­sors may not sup­ply a PPM with high­light­ed sec­tions that may over empha­size a spe­cif­ic sec­tion and under­play oth­er sec­tions.  Advi­sors who are com­mit­ted to the busi­ness and deal with DSTs on a reg­u­lar basis make time to attend inde­pen­dent third-par­ty due dili­gence meet­ings. These meet­ings ana­lyze the offer­ing doc­u­men­ta­tion (PPM) as well as spon­sor back­ground.  In addi­tion, advi­sors should be in con­tact with the spon­sors of these offer­ings to clar­i­fy any aspects of the PPM that may be out­side the scope of a typ­i­cal offer­ing.  We will pro­vide exam­ples.

Intro­duc­tion: The Role of the PPM in DST Invest­ing

A Pri­vate Place­ment Mem­o­ran­dum is a legal dis­clo­sure doc­u­ment pre­pared by the DST spon­sor. Its pur­pose is twofold:

1. Com­pli­ance – To meet fed­er­al and state secu­ri­ties law require­ments, ensur­ing mate­r­i­al risks and details are dis­closed. DST (and oth­er ALTS) are Reg­u­la­tion D (Reg D) offer­ings. A Reg D offer­ing is a type of pri­vate secu­ri­ties offer­ing in the Unit­ed States that allows com­pa­nies to raise cap­i­tal with­out reg­is­ter­ing the secu­ri­ties with the SEC (Secu­ri­ties and Exchange Com­mis­sion), as long as they meet cer­tain require­ments. For issuers it is about com­pli­ance and lia­bil­i­ty pro­tec­tion.
2. Investor Pro­tec­tion – To equip investors with infor­ma­tion nec­es­sary to eval­u­ate the invest­ment. This needs to be about pro­tec­tion and trans­paren­cy.

Reg D is com­mon­ly used by star­tups, real estate syn­di­ca­tions, pri­vate equi­ty funds, and oth­er busi­ness­es that want to raise mon­ey more quick­ly and with low­er costs than a tra­di­tion­al pub­lic offer­ing.

Key Points Regard­ing Com­pli­ance:

1. Exemp­tion from Reg­is­tra­tion
   • Reg D pro­vides exemp­tions under the Secu­ri­ties Act of 1933, so com­pa­nies don’t need to go through the lengthy and expen­sive SEC reg­is­tra­tion process.
2. Types of Reg D Offer­ings
   • Rule 504: Under this rule a spon­sor can raise up to $10 mil­lion in a 12-month peri­od. This may allow some gen­er­al solic­i­ta­tion depend­ing on state laws.
   • Rule 506(b): This pro­vides for unlim­it­ed cap­i­tal raise. This may be offered (sold) to unlim­it­ed accred­it­ed investors and up to 35 non-accred­it­ed (sophis­ti­cat­ed) investors. Under this pro­vi­sion there is No gen­er­al solicitation/advertising allowed. Under this rule investors can sim­ply self-cer­ti­fy accred­it­ed sta­tus.
   • Rule 506©: This rule also per­mits an unlim­it­ed cap­i­tal raise. This allows for gen­er­al solic­i­ta­tion and adver­tis­ing. How­ev­er, all investors must be accred­it­ed, and the issuer must ver­i­fy the investor accred­it­ed sta­tus. There would be a require­ment for a third-par­ty advi­sor, CPA, attor­ney or oth­er par­ty to cer­ti­fy accred­it­ed sta­tus of the investor.
3. Who Can Invest
   • Typ­i­cal­ly lim­it­ed to accred­it­ed investors (high-net-worth indi­vid­u­als or insti­tu­tions that meet SEC finan­cial cri­te­ria).
   • Accred­it­ed investor def­i­n­i­tion is based on an either-or cri­te­ria of either income or net worth.  Income require­ments are $200,000 for sin­gles, $300,000 for cou­ples in the past two years.  Net worth is $1M exclud­ing pri­ma­ry res­i­dence.  These thresh­olds are cur­rent­ly being reviewed by the SEC.
   • In some cas­es (like 506(b)), a lim­it­ed num­ber of sophis­ti­cat­ed but non-accred­it­ed investors can par­tic­i­pate. (Not­ed pre­vi­ous­ly a lim­it of 35 non-accred­it­ed investors which spon­sors will need to mon­i­tor).
4. Form D Fil­ing
   • Even though the offer­ing is exempt from SEC reg­is­tra­tion, issuers must file a short notice called Form D with the SEC with­in 15 days after the first sale. Reg D offer­ing still includes a moun­tain of required doc­u­men­ta­tion.
5. Why Com­pa­nies Use Reg D
   • This reg­is­tra­tion enables spon­sors faster access to cap­i­tal. It may take near­ly a year to bring a DST to the mar­ket so faster is a rel­a­tive term.
   • There are typ­i­cal­ly low­er legal and com­pli­ance costs com­pared to Ini­tial Pub­lic Offer­ing. (IPOs)
   • There is (poten­tial­ly) more flex­i­bil­i­ty in struc­tur­ing pri­vate place­ments
   • A Reg D offer­ing is a way for com­pa­nies to raise pri­vate cap­i­tal legal­ly, with­out going pub­lic, while still com­ply­ing with SEC rules.

Here’s why PPMs pro­vide investor pro­tec­tion:

1. Full Dis­clo­sure of Risks

• A PPM lays out all known risks relat­ed to the invest­ment: mar­ket risks, man­age­ment risks, liq­uid­i­ty risks, con­flicts of inter­est, etc.
• This gives investors the infor­ma­tion they need to make an informed deci­sion, rather than being mis­led by sales pitch­es. Advi­sors need to be well versed in the offer­ing doc­u­ments to answer ques­tions. Investors may also inter­face direct­ly with the spon­sor rep­re­sen­ta­tives via webi­na­rs and direct con­ver­sa­tions.

2. Trans­paren­cy of Terms

• The PPM explains the struc­ture of the deal:
  • Min­i­mum invest­ment- In most DST offer­ings where a §1031 exchange is uti­lized as the vehi­cle (for replace­ment prop­er­ty) to come into the DST the min­i­mum is $100,000. Cash investors may have a low­er thresh­old of invest­ing.  This low­er thresh­old enables small­er accred­it­ed investors the abil­i­ty to enter the invest­ment vehi­cle.
  • Investor rights and restric­tions are defined, and DST should be con­sid­ered illiq­uid invest­ments (sim­i­lar to most real estate invest­ing).
  • Use of pro­ceeds- this is a crit­i­cal por­tion of the PPM, and we will ampli­fy the impor­tance in a lat­er part of the entire post­ing.
  • Fees, dis­tri­b­u­tions, and prof­it splits while part of the use of pro­ceeds need to be clar­i­fied as to exact­ly who is par­tic­i­pat­ing in the acqui­si­tion, pack­ag­ing and offer­ing of the DST.  There will also be an exit fee or cost when the DST is sold at the end of the hold­ing peri­od.
• The fee dis­clo­sure ensures investors under­stand how their mon­ey will be used and what they can real­is­ti­cal­ly expect.

3. Legal Safe­guards Against Mis­rep­re­sen­ta­tion

• By pro­vid­ing writ­ten dis­clo­sures, issuers lim­it lia­bil­i­ty and reduce the risk of being accused of fraud or mis­rep­re­sen­ta­tion.
• For investors, this cre­ates a paper trail of what was promised vs. what was deliv­ered. If some­thing goes wrong, the PPM can serve as evi­dence. Advi­sors should arrange for addi­tion­al sup­port mate­ri­als in addi­tion to the PPM.  These may include area infor­ma­tion, jobs sta­tis­tics, appraisal infor­ma­tion as well as com­pet­i­tive set of oth­er prop­er­ties in the area if pos­si­ble.

4. Suit­abil­i­ty & Com­pli­ance

• In offer­ings that allow non-accred­it­ed investors (e.g., Rule 506(b)), the PPM often includes ques­tion­naires or investor rep­re­sen­ta­tions to con­firm that investors are finan­cial­ly sophis­ti­cat­ed enough to eval­u­ate the risks.
• This ensures investors aren’t putting mon­ey into deals beyond their means or under­stand­ing.
• There is a new move­ment to per­mit Retail Investor Access to Pri­vate Mar­ket Assets Through Reg­is­tered Funds. As of this writ­ing, there is a rec­om­men­da­tion by the SEC Investor Advi­so­ry Com­mit­tee. There will need to be clar­i­fi­ca­tion on how to effec­tive­ly mon­i­tor and eval­u­ate who is invest­ing.  We will pro­vide a deep­er dive into this new move­ment in future writ­ing.

5. Exit Strat­e­gy & Liq­uid­i­ty Warn­ings

• Most pri­vate place­ments are illiq­uid (you can’t eas­i­ly sell your inter­est).
• The PPM must clear­ly dis­close these lim­i­ta­tions, so investors know upfront that their mon­ey may be tied up for years.
• The exit strate­gies may include a cash out options, uti­liz­ing anoth­er §1031 exchange, a §721 UPREIT that may be option­al or manda­to­ry.  Investors as well as advi­sors need to ful­ly under­stand the poten­tial exit strate­gies.

Bot­tom line:

A PPM pro­tects investors by pro­vid­ing hon­est, com­pre­hen­sive, and legal­ly required dis­clo­sures about the risks, terms, and struc­ture of a pri­vate offer­ing. It helps pre­vent mis­un­der­stand­ings and gives investors the abil­i­ty to decide whether the deal aligns with their goals and risk tol­er­ance. Once the DST has been ful­ly sub­scribed the oper­a­tion of the prop­er­ty or asset is vital­ly impor­tant.

Here is a side-by-side com­par­i­son on the pro­tec­tions pro­vid­ed in the PPM to Investors and Issuer.

Investor Pro­tec­tions	Issuer Pro­tec­tions
Risk Dis­clo­sure: Gives investors a clear pic­ture of poten­tial risks so they can make informed choic­es.	Lim­its Lia­bil­i­ty: Writ­ten dis­clo­sure helps defend against claims of fraud or mis­rep­re­sen­ta­tion.
Trans­paren­cy of Terms: Out­lines fees, prof­it splits, dis­tri­b­u­tions, vot­ing rights, and exit strate­gies.	Sets Expec­ta­tions: Ensures all investors receive the same infor­ma­tion, reduc­ing dis­putes lat­er.
Use of Pro­ceeds: Explains exact­ly how funds will be used, pre­vent­ing mis­use or hid­den agen­das.	Reg­u­la­to­ry Com­pli­ance: Demon­strates good faith with SEC require­ments (Form D, Reg D rules).
Investor Suit­abil­i­ty: Includes ques­tion­naires to con­firm investors are accred­it­ed or sophis­ti­cat­ed enough.	Proof of Due Dili­gence: Shows the issuer took steps to ver­i­fy investor qual­i­fi­ca­tions.
Liq­uid­i­ty Warn­ings: Dis­clos­es that secu­ri­ties are illiq­uid and may not be resold eas­i­ly.	Pro­tects Busi­ness Plans: Clar­i­fies long hold peri­ods so investors can’t claim they were mis­led about exit tim­ing.
Legal Recourse: Cre­ates a doc­u­ment­ed basis if an issuer acts out­side dis­closed terms.	Uni­fied Agree­ment: All investors sign under the same rules, avoid­ing one-off nego­ti­a­tions or spe­cial deals.

DST Risk Fac­tors

If the pur­pose of this writ­ing is the review the PPM in rela­tion to the DST, the fol­low­ing Risk dis­clo­sures are required by secu­ri­ties law and typ­i­cal­ly mul­ti­ple pages.

Com­mon DST Risk Cat­e­gories:

• Illiq­uid­i­ty – Inter­ests can­not be eas­i­ly sold or redeemed.
• Ten­ant Risk – Depen­dence on one or few ten­ants.
• Lever­age Risk – Loan terms, refi­nanc­ing restric­tions.
• Mar­ket Con­di­tions – Local real estate fun­da­men­tals and broad­er econ­o­my.
• Spon­sor Risk – Track record, con­flicts of inter­est, lit­i­ga­tion his­to­ry.

Sin­gle asset or Port­fo­lio of Assets. Cer­tain DSTs offer a sin­gle prop­er­ty such as a mul­ti­fam­i­ly apart­ment (with mul­ti­ple ten­ants) or a sin­gle site self-stor­age.  Oth­er DSTs offer­ings will com­bine mul­ti­ple prop­er­ties into one offer­ing. Investor Note: Pay spe­cial atten­tion to ten­ant con­cen­tra­tion risks. One ten­ant default can sig­nif­i­cant­ly impair dis­tri­b­u­tions. We have exten­sive arti­cles on this top­ic.

Con­clu­sion

A DST can be an effec­tive vehi­cle for tax-deferred real estate invest­ing, but it is not with­out risk. The PPM is the sin­gle most impor­tant dis­clo­sure doc­u­ment. Investors who care­ful­ly ana­lyze the PPM, engage pro­fes­sion­al advi­sors, and com­pare offer­ings are bet­ter equipped to pro­tect cap­i­tal and make sound deci­sions.

NAMCOA® is a SEC reg­is­tered invest­ment advi­so­ry firm that pro­vides com­pre­hen­sive port­fo­lio man­age­ment, finan­cial plan­ning, and fidu­cia­ry deci­sion-mak­ing ser­vices on behalf of retire­ment plan spon­sors. Our Dif­fer­ence is sum­ma­rized by our fidu­cia­ry approach which enables us to bet­ter meet port­fo­lio and retire­ment plan objec­tives, result­ing in stronger risk adjust­ed returns for investors and peace of mind for Clients. We also focus on alter­na­tive real estate invest­ment. Many real estate investors are seek­ing tax deferred solu­tions uti­liz­ing §1031 exchanges or Oppor­tu­ni­ty Zones.

Alter­na­tive invest­ments and DSTs are not for all investors.  The acqui­si­tion of a cer­tain alter­na­tive invest­ments includ­ing DSTs is for accred­it­ed investors only.  Con­tact your invest­ment advis­er for addi­tion­al details on how a DST may be a solu­tion to your §1031 Exchange and suit­ed for your invest­ment future. For more infor­ma­tion on how to prop­er­ly set up an IRC §1031Tax Deferred Exchange or if you are an accred­it­ed investor and would like addi­tion­al infor­ma­tion on a DST con­tact Al DiNi­co­la at 239–691-8098 or email adinicola@namcoa.com.

This is not an offer to pur­chase or solic­i­ta­tion to pur­chase any secu­ri­ty, as such be made only through an offer­ing mem­o­ran­dum or prospec­tus.  Invest­ing in secu­ri­ties, real estate, or any invest­ment, whether pub­lic or pri­vate, involves risk, includ­ing but not lim­it­ed to the poten­tial of los­ing some or all of your invest­ment dol­lars when you invest in secu­ri­ties. You should review any planned finan­cial trans­ac­tions that may have tax or legal impli­ca­tions with your per­son­al tax or legal advi­sor.   NAMCOA, LLC is a Reg­is­tered Invest­ment Advi­sor, reg­u­lat­ed by SEC (Secu­ri­ties and Exchange Com­mis­sion). Our cor­po­rate office is locat­ed at 999 Van­der­bilt Beach Road, Suite 200, Naples Flori­da 34108. Secu­ri­ties Offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC. 5 Cen­ter­pointe Dri­ve, Ste. 400 Lake Oswego, OR, 97035MSC-BD, LLC and NAMCOA are inde­pen­dent­ly owned and are not affil­i­at­ed.

Thank you.

Ref­er­ences

• FINRA. (2023). Under­stand­ing pri­vate place­ments. Retrieved from https://www.finra.org
• Inter­nal Rev­enue Ser­vice. (2004). Rev­enue Rul­ing 2004–86. Wash­ing­ton, D.C.
• Secu­ri­ties and Exchange Com­mis­sion. (2022). Pri­vate place­ment guid­ance. Retrieved from https://www.sec.gov
• Nation­al Real Estate Investor. (2023). Trends in Delaware Statu­to­ry Trust offer­ings. Retrieved from https://www.nreionline.com